Canadian Magma Acquires 98.35 Percent in HS Energy Skip to content

Canadian Magma Acquires 98.35 Percent in HS Energy

Canadian company Magma Energy has acquired a 98.53 stake in the Icelandic energy company HS. Magma’s Swedish subsidiary bought Geysir Green Energy’s share in the company. The Icelandic government had requested that the acquisition agreement would not be signed until after today’s cabinet meeting but its request was not complied with.

Harnessing geothermal energy in Iceland. Photo by Páll Stefánsson.

With the acquisition, Magma has the right to harness energy in the Sudurnes region in southwest Iceland. The maximum lease period is 65 years, Fréttabladid reports.

Minister of Industry Katrín Júlíusdóttir met with Magma’s representatives yesterday and discussed the possibility of shortening the maximum lease period to 40 years.

The minister is hopeful that an agreement will be reached in that regard, even as early as today. She also discussed the possibility of the Icelandic state having a preemptive right to purchase stock in HS Energy and said Magma had been positive towards that request.

In terms of criticism of a foreign company acquiring the harnessing rights of Icelandic natural resources, Júlíusdóttir pointed out that the Independence Party and the Progressive Party are responsible for having privatized HS Energy.

The company is now being transferred from one private party to another—the nationality is not the main issue, the minister argued.

“If the natural resources are secure and the nation will receive yield for its natural resources and enjoy the profits created by them, the nationality of the producer isn’t the main issue as far as I’m concerned,” she iterated.

The acquisition price of GGE’s share in HS Energy is ISK 16 billion (USD 121 million, EUR 99 million) and will be paid in cash and with the takeover of commercial papers. Part of the payment can also be in the form of stock in the Canadian mother company.

CEO of GGE Alexander K. Gudmundsson said the minimum part of cash in the acquisition price is 80 percent, but the entire amount could also be paid in cash.

He said the seller will not give the buyer a loan for part of the acquisition price, as was the case when Magma bought Reykjavík Energy’s share in HS.

CEO of Magma Ross J. Beatty said that with the acquisition of GGE’s share in HS, Magma’s total investment in the Icelandic economy amounts to more than ISK 33 billion (USD 250 million, EUR 203 million).

Beatty said his company considers this a long-term investment—many years will pass before it begins returning profits.

He also confirmed that negotiations are currently taking place with the Icelandic government on a shorter lease period and a preemptive purchase right for the state.

In an interview with Stöd 2 yesterday, Beatty said that the general energy price for large-scale companies in Iceland is low and that Magma is considering increasing it.

Ásgeir Margeirsson, CEO of Magma in Iceland, said the company is planning to harness geothermal energy in Reykjanes peninsula for various projects, such as the aluminum smelter which is currently under construction in Helguvík, the enlargement of the smelter in Straumsvík outside Hafnarfjördur and a data center.

Margeirsson added that a number of drillings are planned, provided the necessary licenses are obtained. However, he emphasized that Magma’s acquisition in GGE’s shares in HS Energy was not at all dependent on the aforementioned projects.

Click here to read more about this story and here to read more about low energy prices in Iceland.

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